Negative Interest Rates and Equities Bubbles

A story in today’s Wall Street Journal caught my attention. After reading in the past that individuals in the EU and other countries are not the only ones heavily invested in stocks in THIS country, but Europe’s insurers
are investing in ways not typical for their industry.

What paid the bills in the past for the likes of Allianz SE were low risk bonds, now some new investments they have chosen are not typical, like investing in a military garrison for the U.K.’s Parachute Regiment, a Texas wind farm and a sixteen mile sewer tunnel in London.

Negative interest rates around the globe have forced investors, insurance firms and others to look for any type of return and take uncharacteristic chances to boost the bottom line. So when does this all end? Will it end when our Fed becomes the leader in the world and raises rates. What happens when corporate earnings fizzle out, which might be just around the corner.

In the event the Fed is forced to go the other way, I can’t even think what would happen if negative interest rates hit our shores. CDs, remember those investments? Senior citizens relied on those investments to give them some sort of return to subsidize their Social Security payments. Now they are forced into the stock market adding to that bubble and they too are making some uncharacteristic choices just to survive.

When this equity bubble bursts, will gold get a boost or will the price of gold suffer the same fate as equities as higher interest rates boost the dollar and crush the price of gold. Or will gold be the only safe haven investment?

With the election right around the corner, let’s not forget there are 469 seats in the Congress (34 Senate seats and all 435 House seats) that are up for election November 8th and they might be even more important than who winds up in the White House. It seems that because the two presidential candidates as so very entertaining, these down ballot races have little or no coverage. So believe it or not, the real big story will be whether or not the Democratic party will be able to regain control of the Senate. In order to achieve that, they will have to gain 5 seats. And let’s not forget the Supreme Court. The sudden death of Justice Antonin Scalia in February this year has made the outcome of the 2016 senate election even more important. A 60-vote confirmation is required in the Senate to confirm the next Justice. As we see what’s at stake at this year’s election, it has NEVER been more important to get up and cast your vote in the most important election this country have ever experienced.

Don’t miss your chance. Our county depends on YOU!